As Transit Strike Ends, Retail Looks to Salvage Marred Holiday Season

With New York transit workers set to return to work today, retailers in the city hope to salvage the holiday season with big sales next week.

NEW YORK — As New York City transit workers ended their 60-hour strike on Thursday, retailers here sought to stop the bleeding and save the holiday shopping season.

Deeper markdowns and more promotions that will run through the end of the year are likely, retail analysts said.

With the key week before Christmas all but lost, merchants will be challenged to entice customers back into stores without selling merchandise so cheaply that profit margins will be irreparably eroded.

"I really do believe in the black hole in retail," said Michael Gould, chairman and chief executive officer of Bloomingdale's. "When you lose it, it's lost."

Gould said he anticipated disappointing sales on Thursday, but added that, with the walkout over, some business could be made up Friday and Saturday. Overall, the strike will have a "minimal effect on December" for Bloomingdale's. While some stores were ratcheting up markdowns, Gould said Bloomingdale's would stick to its strategy of starting post-Christmas sales on Monday.

The subway and bus strike that shut down the largest mass transit system in the U.S., serving seven million riders a day, had profound implications for local retailers. And the walkout by 33,700 members of Transport Workers Union Local 100 caused hardship across the board, from millions of people who struggled to get to their jobs, to students who couldn't travel to school, to gridlock, to tourists who stayed away or curtailed their plans.

"New York retail for the week will be off at least 20 percent to 30 percent, assuming the buses and subways are running on Saturday and Sunday," said Burt P. Flickinger 3rd, managing director of Strategic Resources Group. "Sales and markdowns will accelerate. Saks last week went to 60 percent off. Consumers are expecting to see those discounts immediately" from other retailers.

Operating profits will be hurt, Flickinger said, with Federated, owner of Macy's, Bloomingdale's and Lord & Taylor, off by 1.5 to 2 percent, and Saks Fifth Avenue, which relies on its flagship here for 25 percent of its sales, down 6 to 7 percent. Stores will have to look at extending their hours on Friday and Saturday evenings, a strategy that's proven successful for discounters, he said.An analysis of the strike's impact on the city by Comptroller William C. Thompson Jr. determined New York could lose $1.6 billion in the first week, a figure that took into account decreased output from reduced workforces and productivity, tax losses, overtime charges and retail losses.

Kathryn Wylde, president and ceo of the Partnership for New York City, a consortium of 200 top companies, estimated that stores lost $60 million a day.

Transit workers, who walked off the job at 3 a.m. Tuesday for the first time since an 11-day strike in April 1980, began returning Thursday night after state mediators brokered the framework of a deal with transit union leaders and the Metropolitan Transportation Authority. Details of the accord — the sticking point was union pension contributions — were not immediately disclosed. But Gov. George Pataki said penalties against the union for violating a law barring strikes by public employees would stand.

Officials said bus and subway service might not be restored until this morning.

"We have an enormous system," Mayor Michael Bloomberg said at a news conference. "It can't be turned on or off with the flip of a switch."

Some business has been irrevocably lost to the Internet. Many Web sites have experienced upticks since the strike was announced at 3 a.m. on Tuesday. Yoox.com, an e-commerce site specializing in designer fashion, footwear and accessories, saw a 5 percent jump in sales from Tuesday morning through Thursday afternoon, said a spokeswoman.

Bluefly, the off-price Web site, benefited from the walkout. The e-commerce site had a "huge" Tuesday, with business 60 percent up compared with the previous year, said ceo Melissa Payner. "We definitely saw an increase in the New York area, but we haven't analyzed all the specifics yet. With people milling around the streets of New York, shopping [online] went later in the day, there was more at home and there was a lift in the evening."

Other Web sites such as barnesandnoble.com capitalized on the strike with pop-ads reminding shoppers that same-day deliveries were still being made to Manhattan addresses despite the strike.

"Amazon.com and costco.com have been data mining for lists of top shoppers," Flickinger said. "The traditional luxury department stores have not been nearly as aggressive."Saks Fifth Avenue started its post-Christmas sale on Wednesday, instead of the day after Christmas. Aggressive markdowns taken earlier in the week will continue providing "major values" for customers, particularly in the New York area, said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates. "Retailers are playing catch-up ball. This is very high stakes. The small guy got hurt, but the saving grace [for national retailers] is that business around the country has been very good."

Walter Loeb, a retail consultant said, "It's a little late for stores to salvage the holiday season. Tomorrow is the extra day compared to last year, but it will be very difficult for retailers to recapture sales. The subways can't run right away. Secondly, people will probably resort to gift cards and do their shopping after Christmas.

Had the transit strike not occurred, Loeb estimated retail sales gains of 3 to 4 percent in the city. "Bloomingdale's, Lord & Taylor, Saks Fifth Avenue and Macy's, retailers with big stores in New York, will be hurt," he said. "Macy's is a national company, so maybe they'll be down 1 percent. Saks' business could be off by 7 or 8 percent, and Bloomingdale's, down 2 percent."

As the strike neared its conclusion on Thursday, a spot check at Macy's, Lord & Taylor, Saks Fifth Avenue and Bloomingdale's showed some sales associates, in lieu of customers, staring blankly, yawning or chatting with each other.

Associates sported ill-fitting red berets to get attention at the Lancôme counter at Macy's main floor. "It's something new for the holidays," said one, rolling her eyes. "We got them Monday, but it was just a coincidence." Upstairs in the DKNY Jeans area, sales associate Bernice Horne said, "Today has been very light, but I think it will pick up tomorrow." Coats, especially by The North Face and Tommy Hilfiger, were bright spots and Beyoncé Knowles' line was in demand, she said.

Aside from shoppers trying on hats, spritzing themselves with perfume and toying with earrings on Lord & Taylor's main floor, the store was eerily quiet. Asked what was selling on the eveningwear floor, Ifeta Balic, a sales associate, said: "On this floor? Nothing. But on the main floor, they're buying fragrances and some jewelry, and the men's floor is selling a lot of sweaters."Rosemary DeFranco, a sales associate in the Lafayette 148 area, was wearing stuffed reindeer antlers with gold bells. "This was catastrophic," she said. "We lost a good bulk of our daytime shoppers who shop on their lunch breaks or after work, because they were unable to get to work. Shoppers went online or they went to their local liquor store for presents."

She also chastised the TWU for not waiting until after the holidays to strike. DeFranco then apologized to a customer who was waiting to be helped. "That's all right. I was listening," the customer said. "They should hang those suckers."

Saks Fifth Avenue offered racks and racks of merchandise with 40 percent markdowns throughout the store. Even seasoned shopper Jamee Gregory marveled at the breadth of the discounts. "I walked 50 blocks to get my hair streaked before I go on vacation. I thought if Saks is having this amazing sale, I should check it out. There are a lot of tourists on the street, but no serious shoppers."

But a saleswoman in the Diane von Furstenberg section said customers primarily were interested in resort clothes to take away with them on vacation or $300 dresses to wear for the holidays. Theory's concept shop was noticeably busy with a few customers waiting to make purchases.

A Louis Vuitton salesman said, "As far as our tourist business and the people who come in from Long Island and New Jersey, that's nonexistent. But it's not too late. We still have two strong days left." Vuitton denim handbags retailing for up to $1,280 and the Manhattan bag, a $1,300-plus style, were bestsellers.

Bloomingdale's had a number of racks, including St. John Cashmere, Ellen Tracy and Marc by Marc Jacobs, promoting 40 percent markdowns. Shoppers were buying full-priced $398 Ralph Lauren cashmere cable sweaters and jeans and jackets from a variety of vendors.

Across Lexington Avenue at Zara, sales associate Kathy Then said traffic was "a little slow, but it hasn't been a complete halt." Long wool coats retailing for $180 and dress shirts ranging from $59 to $79 also have been popular. She also noted that the store will be busier on Monday, when its post-Christmas sale starts.Stores in neighborhoods such as SoHo and the Meatpacking District, which are considered destinations for tourists and serious shoppers, suffered. A sales associate at D&G at 434 West Broadway in SoHo said, "It's been kind of a nightmare. The strike is definitely having an impact. Less shoppers are coming in and less people are coming to work. But we're making it."

Alissa Bennette, the manager of Alexander McQueen on West 14th Street in the Meatpacking District, said, "Definitely the foot traffic here is down. The strike did not impact business at all, actually, because a lot of what we're doing is over the phone."

An employee at Christian Louboutin on Horatio Street said the store was "quieter than normal certainly. In terms of sales, it was pretty OK. We're the downtown store, so we don't really have that much traffic. We have more phone orders and Internet orders."

No such luck for Mihee Coe, the owner of Toto, a handbag and accessories store at Grand Central Terminal. "We basically didn't have Christmas," she said. "Our winter season started very late because the weather was warm. Now this. It's really bad. The fact that transit workers are returning to their jobs will help a little bit, but it's really too late."

Coe lamented what appeared to be a promising holiday that was snatched away by striking transit workers. "Monday was so busy," she said. "Then Tuesday, Wednesday and today [Thursday] were like ghost towns. Emotionally, when people hear something like this, they're not in the mood for buying." Asked what she'll do next, she said: "Tomorrow we'll have a sale and we'll reduce prices a lot more after the holiday."

Branch stores in New Jersey, Westchester and the outer boroughs may have found a silver lining. "Staten Island was very healthy and benefited from Midtown Manhattan workers who would have shopped in the city, but shopped closer to home," Flickinger said. "The stores in Westchester and New Jersey were besieged with business. But because of the long lines, many people just bought their planned purchases and tried to get out as quickly as possible, rather than doing some discretionary shopping."— With contributions from David Moin and Rosemary Feitelberg

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